20080 Federal Register / Vol. 72, No. 77 / Monday, April 23, 2007 / Proposed Rules 

POPPR ............................................................ Fix .................................................................. (Lat. 33°50′34′′ N., long. 118°17′18′′ W.) 

Santa Monica (SMO) ..................................... VOR/DME ...................................................... (Lat. 34°00′37′′ N., long. 118°27′24′′ W.) 

CANOG .......................................................... Fix .................................................................. (Lat. 34°13′24′′ N., long. 118°35′39′′ W.) 

* * * * * * * 

T–249 Van Nuys, CA (VNY) to Seal Beach, CA [New] 

Van Nuys (VNY) ........................................... VOR/DME ...................................................... (Lat. 34°13′24′′ N., long. 118°29′30′′ W.) 

Santa Monica (SMO) ..................................... VOR/DME ...................................................... (Lat. 34°00′37′′ N., long. 118°27′24′′ W.) 

POPPR ............................................................ Fix .................................................................. (Lat. 33°50′34′′ N., long. 118°17′18′′ W.) 

Seal Beach (SLI) ............................................ VORTAC ........................................................ (Lat. 33°47′00′′ N., long. 118°03′17′′ W.) 

*****

Issued in Washington, DC, on April 13, 

2007. 

Edith V. Parish, 

Manager, Airspace and Rules Group. 

[FR Doc. E7–7633 Filed 4–20–07; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 20 

[REG–143316–03] 

RIN 1545–BC56 

Guidance Under Section 2053 

Regarding Post-Death Events 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed amendments to the 

regulations relating to the amount 

deductible from a decedent’s gross 

estate for claims against the estate under 

section 2053(a)(3) of the Internal 

Revenue Code (Code). In addition, the 

proposed regulations update the 

provisions relating to the deduction for 

certain state death taxes to reflect the 

statutory amendments made in 2001 

under sections 2053(d) and 2058. The 

proposed regulations will affect estates 

of decedents against whom there are 

claims outstanding at the time of the 

decedent’s death. This document also 

provides notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by July 23, 2007. 

Outlines of topics to be discussed at the 

public hearing scheduled for August 6, 

2007, at 10 a.m., must be received by 

July 30, 2007. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–143316–03), Room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be hand 

delivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC:PA:LPD:PR (REG–143316–03), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC; or sent 

electronically via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–143316–

03). The public hearing will be held in 

the IRS Auditorium, Internal Revenue 

Building, 1111 Constitution Avenue, 

NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

DeAnn K. Malone, at (202) 622–3112; 

concerning submissions of comments, 

the hearing, and/or to be placed on the 

building access list to attend the 

hearing, Richard Hurst, at (202) 622–

2949 (TDD telephone) (not toll-free 

numbers) or e-mail at 

Richard.A.Hurst@irscounsel.treas.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

Section 2001 of the Code imposes a 

tax on the transfer of the taxable estate, 

determined as provided in section 2051, 

of every decedent, citizen, or resident of 

the United States. Section 2031(a) 

generally provides that the value of the 

decedent’s gross estate shall include the 

value at the time of decedent’s death of 

all property, real or personal, tangible or 

intangible, wherever situated. Section 

2051 provides that the value of the 

taxable estate is determined by 

deducting from the value of the gross 

estate the deductions provided for in 

sections 2051 through 2058. Pursuant to 

section 2053(a), ‘‘the value of the 

taxable estate shall be determined by 

deducting from the value of the gross 

estate such amounts—(1) for funeral 

expenses, (2) for administration 

expenses, (3) for claims against the 

estate, and (4) for unpaid mortgages on, 

or any indebtedness in respect of, 

property where the value of the 

decedent’s interest therein, 

undiminished by such mortgage or 

indebtedness, is included in the value of 

the gross estate, as are allowable by the 

laws of the jurisdiction, whether within 

or without the United States, under 

which the estate is being administered.’’

The deductions allowable under 

sections 2051 through 2058 operate to 

eliminate from estate taxation those 

portions of the gross estate that are 

necessarily expended in paying certain 

claims and expenses of the estate. The 

rationale for those deductions is that 

those expended portions of the gross 

estate are not transferred to the 

decedent’s legatees, beneficiaries, or 

heirs and, therefore, are not subject to 

the transfer tax. 

The amount an estate may deduct for 

claims against the estate has been a 

highly litigious issue. Unlike section 

2031, section 2053(a) does not contain 

a specific directive to value a deductible 

claim at its date of death value. Section 

2053, in fact, specifically contemplates 

expenses such as funeral and 

administration expenses, which are only 

determinable after the decedent’s date of 

death. Although numerous courts have 

addressed section 2053(a)(3), there is 

little or no consistency among the 

conclusions of those courts with regard 

to the extent (if any) to which postdeath events are to be considered in 

valuing such claims. One line of cases 

follows the decision in Ithaca Trust v. 

Commissioner, 279 U.S. 151 (1929), 

holding that the estate tax charitable 

deduction for a charitable remainder 

interest was to be determined as of date 

of death. In Federal judicial circuits 

where the Ithaca Trust date-of-death 

valuation approach is applied to a claim 

against a decedent’s estate under section 

2053(a)(3), courts generally hold that 

post-death events may not be 

considered when determining the 

amount deductible for that claim. At the 

opposite end of the spectrum, there is a 

line of cases that follows the Eighth 

Circuit’s opinion in Jacobs v. 

Commissioner, 34 F.2d 233 (8th Cir. 

1929), cert. denied, 280 U.S. 603 (1929), 

in which the court considered but 

rejected the date-of-death valuation 

approach in determining the deductible 

amount of a claim against the estate. 

The court in Jacobs distinguished Ithaca 

Trust, stating that, unlike charitable 

deductions, ‘‘* * * the claims which 

Congress intended to be deducted were 

actual claims, not theoretical ones.’’ The 


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Federal Register / Vol. 72, No. 77 / Monday, April 23, 2007 / Proposed Rules 20081 

court therefore held that only claims 

presented and determined as valid 

against the estate and actually paid 

could be deducted as claims against the 

estate. Jacobs, 34 F.2d at 235. The courts 

that follow Jacobs generally restrict the 

amount deductible under section 

2053(a)(3) to amounts actually paid by 

the estate in satisfaction of the claim. 

Even in the circuits where the date-ofdeath valuation approach has been 

applied in determining the amount that 

may be deducted for a claim against the 

decedent’s estate, courts have 

recognized exceptions that necessitate 

taking into account events that occur 

after the decedent’s death. For example, 

courts have deviated from the date-ofdeath valuation approach in favor of the 

actual payment approach when a claim 

is contested, contingent, unenforceable, 

becomes unenforceable after the 

decedent’s death, or is not in fact 

presented for payment. The application 

and extent of these exceptions are 

inconsistent from circuit to circuit, 

however, and cannot be reconciled to 

form a conclusive rule applicable to all 

estates. 

The result of this lack of consistency 

in the case law is that similarly situated 

estates are being treated differently for 

Federal estate tax purposes, depending 

only upon the jurisdiction in which the 

executor resides. The Treasury 

Department and the IRS believe that 

similarly situated estates should be 

treated consistently by having section 

2053(a)(3) construed and applied in the 

same way in all jurisdictions. 

One possible approach would be to 

value claims against a decedent’s estate 

on the basis of the facts existing on the 

date of the decedent’s death. The 

Treasury Department and the IRS 

believe, however, that this date-of-death 

valuation approach, when applied, has 

required an inefficient use of resources 

for taxpayers, the IRS, and the courts. 

Determining a date-of-death value 

requires the taxpayer and the IRS to 

retry the substantive issues underlying 

the claims against the estate in a tax 

controversy setting. In most cases, the 

tax controversy is addressed after the 

issue either has been settled by or has 

been argued by parties with adverse 

interests in a court of competent 

jurisdiction that is more familiar with 

the nuances of the underlying 

applicable law. Furthermore, this 

approach has proven to be expensive, 

both in terms of appraisal and litigation 

costs. In addition, this approach 

generally results in a deduction that is 

different from the amount actually paid 

on disputed claims. Finally, the date-ofdeath valuation approach often forces 

the taxpayer involved in actively 

defending against a claim to take 

contradictory positions on the estate tax 

return and in the substantive court 

pleadings, and may actually increase the 

taxpayer’s potential liability. 

After carefully considering the 

numerous judicial decisions and the 

analysis and conclusion in each, the 

legislative history of section 2053 and 

its predecessors, and the various 

possible alternatives, and in order to 

further the goal of the effective and fair 

administration of the tax laws, the 

proposed regulations adopt rules based 

on the premise that an estate may 

deduct under section 2053(a)(3) only 

amounts actually paid in settlement of 

claims against the estate. If the 

resolution of a contested or contingent 

claim cannot be reached prior to the 

expiration of the period of limitations 

for claims for refund, the estate may file 

a protective claim for refund to preserve 

its right to claim a deduction under 

section 2053(a). 

Explanation of Provisions 

The proposed regulations will amend 

the regulations under section 2053 to 

clarify that events occurring after a 

decedent’s death are to be considered 

when determining the amount 

deductible under all provisions of 

section 2053 and that deductions under 

section 2053 are limited to amounts 

actually paid by the estate in 

satisfaction of deductible expenses and 

claims. Final court decisions as to the 

amount and enforceability of the claim 

or expense are accepted in determining 

the amount deductible if the court 

passes upon the facts upon which 

deductibility depends. Settlements are 

accepted if they are reached in bona fide 

negotiations between adverse parties 

with valid claims recognizable under 

applicable law, and if they are not 

inconsistent with the applicable law. A 

protective claim for refund may be filed 

before the expiration of the period of 

limitations for claims for refund in order 

to preserve the estate’s right to claim a 

refund if the amount of a liability will 

not be ascertainable by the time of the 

expiration of the period of limitations 

for claims of refund. A deduction is not 

allowed to the extent the expense or 

claim is compensated for by insurance 

or is otherwise reimbursed. 

The proposed regulations further 

provide that no deduction may be taken 

on an estate tax return for a claim that 

is potential, unmatured, or contested at 

the time the return is filed. A protective 

claim for refund may be filed before the 

expiration of the period of limitations 

for claims for refund in order to 

preserve the estate’s right to claim a 

refund by reason of the deduction of a 

claim against the estate to the extent 

that claim is ultimately paid by the 

estate. 

Additional provisions in the proposed 

regulations provide guidance for other 

particular circumstances. When a claim 

against an estate lists multiple 

defendants, the estate may only deduct 

the decedent’s portion of the liability. 

Claims by family members or 

beneficiaries of a decedent’s estate will 

be strictly scrutinized to ensure that 

they are legitimate claims. If a claim 

becomes unenforceable after the 

decedent’s death, the estate may not 

take a section 2053(a)(3) deduction with 

respect to the claim. If a claim 

represents a decedent’s obligation to 

make recurring payments that will 

likely continue for a period extending 

beyond the final determination of the 

estate tax liability, a deduction is 

allowed only as each payment is made, 

provided the period of limitations for 

claims for refund has not expired or the 

estate has properly preserved the claim 

for refund. Alternatively, a deduction is 

allowed for the cost of a commercial 

annuity purchased by the estate from an 

unrelated dealer in commercial 

annuities in satisfaction of that 

obligation. 

Finally, the proposed regulations 

reflect changes made to section 2053(d) 

and the enactment of section 2058 in 

2001 and clarify that the rules in section 

20.2053–9 apply only to the estates of 

decedents dying on or before December 

31, 2004. 

Proposed Effective Date 

The regulations, as proposed, apply to 

the estate of any decedent dying on or 

after the date final regulations are 

published in the Federal Register. 

Special Analyses 

It has been determined that this notice 

of proposed rulemaking is not a 

significant regulatory action as defined 

in Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has also been determined that section 

553(b) of the Administrative Procedure 

Act (5 U.S.C. chapter 5) does not apply 

to these regulations, and because these 

regulations do not impose a collection 

of information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Therefore, a 

Regulatory Flexibility Analysis is not 

required. Pursuant to section 7805(f) of 

the Code, this notice of proposed 

rulemaking will be submitted to the 

Chief Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 


pwalker on PROD1PC71 with PROPOSALS
20082 Federal Register / Vol. 72, No. 77 / Monday, April 23, 2007 / Proposed Rules 

Comments and Public Hearing 

Before these proposed regulations are 

adopted as final regulations, 

consideration will be given to any 

written (a signed original and eight (8) 

copies) or electronic comments that are 

submitted timely to the IRS. The IRS 

and the Treasury Department also 

request comments on the clarity of the 

proposed rules and how they can be 

made easier to understand. All 

comments will be available for public 

inspection and copying. 

A public hearing has been scheduled 

for August 6, 2007, at 10 a.m. in the IRS 

Auditorium, Internal Revenue Service, 

1111 Constitution Avenue, NW., 

Washington, DC. Due to building 

security procedures, visitors must enter 

at the Constitution Avenue entrance. In 

addition, all visitors must present photo 

identification to enter the building. 

Because of access restrictions, visitors 

will not be admitted beyond the 

immediate entrance area more than 30 

minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

The rules of 26 CFR 601.601(a)(3) 

apply to the hearing. Persons who wish 

to present oral comments at the hearing 

must submit electronic or written 

comments by July 16, 2007, and an 

outline of the topics to be discussed and 

the time to be devoted to each topic 

(signed original and eight (8) copies) by 

July 30, 2007. A period of 10 minutes 

will be allotted to each person for 

making comments. An agenda showing 

the scheduling of the speakers will be 

prepared after the deadline for receiving 

outlines has passed. Copies of the 

agenda will be available free of charge 

at the hearing. 

Drafting Information 

The principal author of these 

proposed regulations is DeAnn K. 

Malone, Office of the Chief Counsel, 

IRS. 

List of Subjects in 26 CFR Part 20 

Estate taxes, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, 26 CFR part 20 is 

proposed to be amended as follows: 

PART 20—ESTATE TAX; ESTATES OF 

DECEDENTS DYING AFTER AUGUST 

16, 1954 

Paragraph 1. The authority citation 

for part 20 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805. * * * 

Par. 2. Section 20.2051–1 is revised to 

read as follows: 

§ 20.2051–1 Definition of taxable estate. 

(a) The taxable estate of a decedent 

who was a citizen or resident (see 

§ 20.0–1(b)(1)(i)) of the United States at 

death is determined by subtracting the 

total amount of the deductions 

authorized by sections 2052 through 

2058 from the total amount which must 

be included in the gross estate under 

sections 2031 through 2044. These 

deductions are in general as follows: 

(1) An exemption of $60,000 (section 

2052) (applicable only to the estates of 

decedents dying on or before December 

31, 1976). 

(2) Funeral and administration 

expenses and claims against the estate 

(including certain taxes and charitable 

pledges) (section 2053). 

(3) Losses from casualty or theft 

during the administration of the estate 

(section 2054). 

(4) Charitable transfers (section 2055). 

(5) The marital deduction (section 

2056). 

(6) Qualified domestic trusts (section 

2056A). 

(7) Family-owned business interests 

(section 2057) (applicable only to the 

estates of decedents dying on or before 

December 31, 2003). 

(8) State death taxes (section 2058) 

(applicable only to the estates of 

decedents dying after December 31, 

2004). 

(b) See section 2106 and these 

regulations for the computation of the 

taxable estate of a decedent who was not 

a citizen or resident of the United 

States. See also § 1.642(g)–1 of this 

chapter concerning the disallowance for 

income tax purposes of certain 

deductions allowed for estate tax 

purposes. 

(c) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or after the date of publication 

of the Treasury decision adopting these 

rules as final regulations in the Federal 

Register. 

Par. 3. Section 20.2053–1 is amended 

by: 

1. Revising the introductory text of 

paragraph (a). 

2. Adding two new sentences at the 

end of paragraph (b)(1). 

3. Revising paragraph (b)(2). 

4. Redesignating paragraph (b)(3) as 

(b)(4) and revising the newly-designated 

paragraph (b)(4). 

5. Adding new paragraphs (b)(3), 

(b)(5), (b)(6), and (e). 

The revisions and additions read as 

follows: 

§ 20.2053–1 Deductions for expenses, 

indebtedness, and taxes; in general. 

(a) General rule. In determining the 

taxable estate of a decedent who was a 

citizen or resident of the United States 

at death, there are allowed as 

deductions under section 2053(a) and 

(b) amounts falling within the following 

two categories (subject to the limitations 

contained in this section and in 

§§ 20.2053–2 through 20.2053–10): 

* * * * * 

(b) * * * (1) * * * In order to 

properly take into account events 

occurring after the date of a decedent’s 

death when determining the amount 

deductible against a decedent’s estate, 

the deduction for any item described in 

paragraph (a) of this section is limited 

to the total amount actually paid 

(subject to any time requirement under 

paragraph (a) of this section) in 

settlement or satisfaction of that item. 

(See however, § 20.2053–1(b)(4) for a 

special rule for deducting certain 

estimated amounts.) 

(2) Effect of court decree—(i) In 

general. If the court with appropriate 

jurisdiction over the administration of 

the estate reviews and approves 

expenditures for funeral expenses, 

administration expenses, claims against 

the estate, or unpaid mortgages as 

allowable estate expenditures under 

local law, the executor may rely on the 

final judicial decision in that matter to 

determine the amount deductible for 

estate tax purposes if the following 

conditions are satisfied: The 

expenditures are otherwise deductible 

under section 2053 and the 

corresponding regulations; the 

expenditures have been paid by the 

estate or meet the requirements for 

estimated expenses; the court reviewed 

the facts relating to the expenditures; 

and the court’s decision is consistent 

with local law. See § 20.2053–2 for 

additional rules regarding the 

deductibility of funeral expenses. See 

§ 20.2053–3 for additional rules 

regarding the deductibility of 

administration expenses. See § 20.2053–

4 for additional rules regarding the 

deductibility of claims against the 

estate. See § 20.2053–7 for additional 

rules regarding the deductibility of 

unpaid mortgages. If the decision 

reached by the court is inconsistent 

with local law, the estate may not rely 

on the court’s decree to establish the 


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Federal Register / Vol. 72, No. 77 / Monday, April 23, 2007 / Proposed Rules 20083 

amount deductible for estate tax 

purposes. For example, a local court 

decree approving an allowance made to 

an executor in excess of the amount or 

limit prescribed by statute may not be 

relied upon to establish the amount 

deductible under section 2053. An 

estate will not be denied an otherwise 

allowable deduction under section 2053 

solely because a local court decree has 

not been entered with respect to that 

amount if the amount would be 

allowable under local law and if no 

court decree is required under 

applicable law for payment. 

(ii) Consent decree. An executor may 

rely on a local court decree rendered by 

consent to establish the amount 

deductible under section 2053 for 

amounts paid (or meeting the 

requirements for estimated expenses) if 

the consent was a bona fide recognition 

of the validity of the claim and was 

accepted by the court as satisfactory 

evidence upon the merits. Consent 

given by all parties having interests 

adverse to that of the claimant will be 

presumed to be recognition of the 

claim’s validity. See § 20.2053–4(b)(4) 

for special rules to determine the 

amount deductible for claims by 

decedent’s family members, related 

entities, or beneficiaries of the 

decedent’s estate or revocable trust. 

(3) Settlements. An executor may rely 

on a settlement to establish the amount 

deductible under section 2053 for 

amounts paid (or meeting the 

requirements for estimated expenses) 

(subject to any applicable time 

limitation under paragraph (a) of this 

section) if the following conditions are 

satisfied: The settlement resolves a bona 

fide issue in an active and genuine 

contest; the settlement is the product of 

arm’s length negotiations by parties 

having adverse interests with respect to 

the claim; and the settlement is within 

the range of reasonable outcomes under 

applicable state law governing the 

issues resolved by the settlement. A 

settlement that results in a compromise 

between the positions of such adverse 

parties and reflects the parties’

assessments of the relative strengths of 

their respective positions is a settlement 

that is within the range of reasonable 

outcomes. However, a deduction for 

amounts paid in settlement of a claim 

against the decedent’s estate will not be 

allowed if the terms of the settlement 

are inconsistent with applicable local 

law. No deduction will be allowed for 

amounts paid in settlement of an 

unenforceable claim. See § 20.2053–

4(b)(4) for special rules to determine the 

amount deductible for claims by 

decedent’s family members, related 

entities, or beneficiaries of the 

decedent’s estate or revocable trust. For 

settlements structured using recurring 

payments, see § 20.2053–4(b)(7). 

(4) Estimated amounts. A deduction 

will be allowed for a claim that satisfies 

all applicable requirements even though 

its exact amount is not then known, 

provided that the amount is 

ascertainable with reasonable certainty, 

and will be paid. Under this exception 

to the rule set forth in paragraph (b)(1) 

of this section, no deduction may be 

taken upon the basis of a vague or 

uncertain estimate. If a deduction is 

allowed in advance of payment and the 

payment is thereafter waived or 

otherwise left unpaid, it shall be the 

duty of the executor to notify the 

Commissioner and to pay the resulting 

tax, together with interest. To the extent 

that the amount of a liability otherwise 

deductible under section 2053 is not 

ascertainable with reasonable certainty 

at the time of examination of the return 

by the Commissioner, or to the extent 

that it is not then clear that the amount 

will be paid, that amount will not be 

allowed as a deduction by the 

Commissioner. If the deduction is 

disallowed in whole or in part on 

examination of the return and the 

amount of the liability is subsequently 

ascertained and paid, relief may be 

sought by a timely claim for refund as 

provided by section 6511. A protective 

claim for refund may be filed before the 

expiration of the period of limitations 

for claims for refund in order to 

preserve the estate’s right to claim a 

refund if the amount of a liability was 

or will not be paid before the expiration 

of the period of limitations for claims 

for refund. Although the protective 

claim need not state a particular dollar 

amount or demand an immediate 

refund, the protective claim must 

identify the outstanding liability or 

claim that would have been deductible 

under section 2053(a) had it already 

been paid. The protective claim must 

also describe the reasons and 

contingencies delaying the 

determination of the liability or the 

actual payment of the claim. Action on 

protective claims will proceed after the 

executor has notified the Commissioner 

that the contingency has been resolved. 

(5) Reimbursements. A deduction is 

not allowed to the extent that the 

expense or claim is or could be 

compensated for by insurance or 

otherwise reimbursed. 

(6) Examples. The following examples 

illustrate the application of this section. 

Assume that the amounts are payable 

out of property subject to claims and are 

allowable by the law of the jurisdiction 

governing the administration of the 

estate, whether the applicable 

jurisdiction is within or without the 

United States. 

Example 1. Estimated amounts, deduction 

ascertainable. Decedent’s (D’s) estate was 

probated in state. State law provides that the 

personal representative shall receive 

compensation equal to 2.5 percent of the 

value of the probate estate. The executor (E) 

may claim a deduction for estimated fees 

equal to 2.5 percent of D’s probate estate on 

the estate tax return filed for D’s estate as an 

estimated amount, provided the amount will 

be paid to E after the estate tax return is filed. 

To the extent that, at the time of the 

examination of the return, the amount has 

not been paid and E cannot satisfy the 

conditions listed in paragraph (b)(4) of this 

section and § 20.2053–3(b)(1), the deduction 

will be disallowed, but the executor may file 

a timely protective claim for refund to protect 

the estate’s right to a refund once the amount 

has been paid or satisfies the applicable 

conditions. If the deduction is allowed in 

advance of payment and the payment is 

thereafter waived or otherwise left unpaid, it 

shall be the duty of the executor to notify the 

Commissioner and to pay the resulting tax, 

together with interest. 

Example 2. Estimated amounts, deduction 

not ascertainable. Prior to death, Decedent 

(D) is sued by Claimant (C) for $100× in a tort 

proceeding and responds asserting 

affirmative defenses available to D under 

applicable local law. C and D are unrelated. 

D subsequently dies and D’s Form 706 is due 

before a final judgment is entered in the case. 

The executor (E) of D’s estate may not take 

a deduction for $100× on D’s estate tax return 

as an estimated amount because the 

deductible amount cannot be ascertained 

with reasonable certainty in accordance with 

§ 20.2053–4(b)(2). If the amount of the actual 

liability will not be paid or cannot be 

ascertained with reasonable certainty before 

the expiration of the period of limitations for 

claims for refund, E may file a protective 

claim before that date in order to preserve the 

estate’s right subsequently to claim a refund. 

* * * * * 

(e) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or after the date of publication 

of the Treasury decision adopting these 

rules as final regulations in the Federal 

Register. 

Par. 4. Section 20.2053–3 is amended 

by: 

1. Redesignating paragraphs (b)(2) and 

(b)(3) as paragraphs (b)(4) and (b)(5), 

respectively. 

2. Designating the undesignated text 

following paragraph (b)(1) as new 

paragraph (b)(3). 

3. Revising paragraphs (b)(1) and 

(c)(1). 

4. Adding new paragraphs (b)(2), 

(d)(3) and (e). 

The revisions and additions read as 

follows: 

§ 20.2053–3 Deductions for expenses of 

administering estate. 

* * * * * 


pwalker on PROD1PC71 with PROPOSALS
20084 Federal Register / Vol. 72, No. 77 / Monday, April 23, 2007 / Proposed Rules 

(b) Executor’s commissions. (1) The 

executor, in filing the estate tax return, 

may deduct executor’s commissions in 

such an amount as has actually been 

paid, or in an amount which at the time 

of filing the estate tax return may 

reasonably be expected to be paid, but 

no deduction may be taken if no 

commissions are to be collected. If the 

amount of the commissions has not 

been fixed by decree of the proper court, 

the deduction will be allowed on the 

examination of the return, to the extent 

that all three of the following conditions 

are satisfied: 

(i) The Commissioner is reasonably 

satisfied that the commissions claimed 

will be paid. 

(ii) The amount claimed as a 

deduction is within the amount 

allowable by the laws of the jurisdiction 

in which the estate is being 

administered. 

(iii) It is in accordance with the 

usually accepted practice in the 

jurisdiction to allow such an amount in 

estates of similar size and character. 

(2) If the conditions described in 

paragraph (b)(1) of this section are not 

met, a protective claim for refund may 

be filed before the expiration of the 

period of limitations for claims for 

refund in order to preserve the estate’s 

right to claim a refund for future 

amounts paid as described in § 20.2053–

1(b)(4). 

(3) If the deduction is disallowed in 

whole or in part on the examination of 

the return and a protective claim was 

timely filed, the disallowance will be 

subject to modification once the 

requirements for deductibility are met. 

If the deduction is allowed in advance 

of payment and payment is thereafter 

waived or otherwise left unpaid, it shall 

be the duty of the executor to notify the 

Commissioner and to pay the resulting 

tax, together with interest. 

* * * * * 

(c) Attorney’s fees. (1) The executor, 

in filing the estate tax return, may 

deduct such an amount of attorney’s 

fees as has actually been paid, or an 

amount which at the time of filing may 

reasonably be expected to be paid. If on 

the examination of the return, the fees 

claimed have not been awarded by the 

proper court and paid, the deduction 

will, nevertheless, be allowed, if the 

Commissioner is reasonably satisfied 

that the amount claimed will be paid 

and that it does not exceed a reasonable 

remuneration for the services rendered, 

taking into account the size and 

character of the estate and the local law 

and practice. If the amount does not 

satisfy these requirements, a protective 

claim for refund may be filed before the 

expiration of the period of limitations 

for claims for refund in order to 

preserve the estate’s right to claim a 

refund for future amounts paid as 

described in § 20.2053–1(b)(4). If the 

deduction is disallowed in whole or in 

part on the examination of the return 

and a protective claim was timely filed, 

the disallowance will be subject to 

modification once the requirements for 

deductibility are met. 

* * * * * 

(d) * * * 

(3) Expenses incurred in defending 

the estate against claims described in 

section 2053(a)(3) are deductible as 

provided in § 20.2053–1 if the expenses 

are incurred incident to the assertion of 

defenses to the claim available under 

the applicable law, even if the estate is 

not ultimately victorious. For purposes 

of this section, ‘‘expenses incurred in 

defending the estate against claims’’

include costs relating to the arbitration 

and mediation of contested issues, costs 

associated with defending the estate 

against claims (whether or not 

enforceable), and costs associated with 

reaching a negotiated settlement of the 

issues. Expenses incurred merely for the 

purpose of unreasonably extending the 

time for payment, or incurred other than 

in good faith, are not deductible. 

(e) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or after the date of publication 

of the Treasury decision adopting these 

rules as final regulations in the Federal 

Register. 

Par. 5. Section 20.2053–4 is revised to 

read as follows: 

§ 20.2053–4 Deduction for claims against 

the estate. 

(a) In general. (1) For purposes of this 

section, liabilities imposed by law or 

arising out of contracts or torts are 

deductible if they meet the requirements 

set forth in § 20.2053–1 and this section. 

Except as provided in paragraph (b) of 

this section, the amounts that may be 

deducted as claims against a decedent’s 

estate are limited to amounts for 

legitimate and bona fide claims that—

(i) Represent personal obligations of 

the decedent existing at the time of the 

decedent’s death; 

(ii) Are enforceable against the 

decedent’s estate at the time of payment; 

and 

(iii) Are actually paid by the estate in 

settlement of the claim. 

(2) Events occurring after the date of 

a decedent’s death shall be considered 

when determining the amount 

deductible against a decedent’s estate. 

(b) Special rules—(1) Potential and 

unmatured claims. Claims that are 

unmatured on the date of the decedent’s 

death and that later mature and are paid 

are deductible by the estate. However, 

no deduction may be taken on an estate 

tax return for a potential or unmatured 

claim. If the claim matures and is paid 

prior to the expiration of the period of 

limitations for filing a claim for refund, 

the estate may file a claim for refund as 

provided by section 6511. A protective 

claim for refund may be filed before the 

expiration of the period of limitations 

for claims for refund in order to 

preserve the estate’s right to claim a 

refund once the claim against the 

decedent’s estate is matured and is paid 

or may be estimated as provided in 

§ 20.2053–1(b)(4). Although the 

protective claim need not state a 

particular dollar amount or demand an 

immediate refund, the protective claim 

must identify the outstanding liability 

or claim that would have been 

deductible under section 2053(a) had it 

already been paid, and must describe 

the reasons and contingencies delaying 

actual payment of the liability or claim. 

Action on protective claims will 

proceed after the executor has notified 

the Commissioner that the contingency 

has been resolved. 

(2) Contested claims. No deduction 

may be taken on an estate tax return for 

a claim against the decedent’s estate to 

the extent the estate is contesting the 

decedent’s liability. However, see 

§ 20.2053–1(b)(4) relating to estimated 

amounts. 

(3) Claims against multiple parties. If 

the decedent or the decedent’s estate is 

one of two or more parties against 

whom the claim is being asserted, the 

estate may only deduct the portion of 

the total claim due from and paid by the 

estate, reduced by the total of any 

reimbursement received from another 

party, insurance, or otherwise. The 

estate’s deductible portion will also be 

reduced by the amount or contribution 

the estate could have collected from 

another party or an insurer but which 

the estate declines or fails to attempt to 

collect. If, however, the estate 

establishes that the burden of necessary 

collection efforts would have 

outweighed the benefit from those 

efforts, the potential reimbursement will 

not reduce the estate’s deductible 

portion of the total claim. If the estate 

establishes that the party from whom a 

potential reimbursement could be 

collected could only pay a portion of the 

potential reimbursement, then only that 

portion that could reasonably have been 

expected to be collected will reduce the 

estate’s deductible portion of the total 

claim. 

(4) Claims by family members, related 

entities, or beneficiaries. Relationships 

with and among a decedent and the 


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decedent’s family members, related 

entities, and beneficiaries may create 

the potential for collusion in asserting 

invalid or exaggerated claims in order to 

reduce the decedent’s taxable estate. 

Thus, notwithstanding § 20.2053–1 and 

paragraph (a) of this section, there will 

be a rebuttable presumption that claims 

by a family member of the decedent, a 

related entity, or a beneficiary of the 

decedent’s estate or revocable trust are 

not legitimate and bona fide and 

therefore are not deductible. Evidence 

sufficient to rebut the presumption may 

include evidence that the claim arises 

from circumstances that would 

reasonably support a similar claim by 

unrelated persons or non-beneficiaries. 

Similarly, a settlement between a 

decedent’s estate or revocable trust and 

a family member, a related entity, or a 

beneficiary of the decedent’s estate or 

revocable trust will be presumed to not 

be deductible absent evidence of the 

legitimacy and bona fide nature of the 

claim. For purposes of this section, 

family members include the spouse of 

the decedent; the grandparents, parents, 

siblings, and lineal descendants of the 

decedent or of the decedent’s spouse; 

and the spouse and lineal descendants 

of any such grandparent, parent, and 

sibling. Family members include 

adopted individuals. For purposes of 

this section, a related entity is an entity 

in which the decedent, either directly or 

indirectly, had a beneficial ownership 

interest at the time of the decedent’s 

death or at any time during the threeyear period ending on the decedent’s 

date of death. Such an entity, however, 

shall not include a publicly-traded 

entity nor shall it include a closely-held 

entity in which the combined beneficial 

interest, either direct or indirect, of the 

decedent and the decedent’s family 

members, collectively, is less than thirty 

percent of the beneficial ownership 

interests (whether voting or non-voting). 

(5) Unenforceable claims. Claims that 

are unenforceable prior to or at the 

decedent’s death are not deductible, 

even if they are actually paid. Claims 

that become unenforceable during the 

administration of the estate are not 

deductible to the extent that they are 

paid after they become unenforceable. 

To the extent that enforceability of a 

claim is at issue, see paragraph (b)(2) of 

this section relating to contested claims. 

(6) Claims founded upon a promise. 

Except with regard to pledges or 

subscriptions, (see § 20.2053–5), section 

2053(c)(1)(A) provides that the 

deduction for a claim founded upon a 

promise or agreement is limited to the 

extent that the promise or agreement 

was bona fide and in exchange for 

adequate and full consideration in 

money or money’s worth. For this 

purpose, bona fide and for adequate and 

full consideration in money or money’s 

worth requires that the promise or 

agreement must have been made in good 

faith, and that the price must have been 

an adequate and full equivalent 

reducible to a money value. 

(7) Recurring payments—(i) NonContingent obligations. If a decedent is 

obligated to make recurring payments 

on an enforceable and certain claim that 

are not subject to a contingency and if 

the payments will continue for a period 

that will likely extend beyond the final 

determination of the estate tax liability, 

the obligation may be deducted as an 

estimated amount using the rules in 

§ 20.2053–1. The amount deductible is 

the present value of the payments on the 

decedent’s date of death as determined 

under § 20.2031–7(d). See §§ 20.7520–1 

through 20.7520–4. If there is a 

reasonable likelihood that full 

satisfaction of the liability will not be 

made, then the obligation will be 

deemed to be subject to a contingency 

for purposes of this section. 

(ii) Contingent obligations. If a 

decedent has a recurring obligation to 

pay an enforceable and certain claim, 

but the decedent’s obligation is subject 

to a contingency or is otherwise not 

described in paragraph (b)(7)(i) of this 

section, the estate’s deduction is limited 

to amounts actually paid by the estate 

in satisfaction of the claim. 

(iii) Purchase of commercial annuity 

to satisfy recurring obligation to pay. If 

a decedent has a recurring obligation 

(whether or not contingent) to pay an 

enforceable and certain claim and the 

estate purchases a commercial annuity 

from an unrelated dealer in commercial 

annuities in an arms-length transaction 

to satisfy the obligation, the amount 

deductible by the estate is the sum of—

(A) The amount paid for the 

commercial annuity; and 

(B) Any amount actually paid to the 

claimant by the estate prior to the 

purchase of the commercial annuity. 

(c) Interest on claims. The interest on 

a deductible claim is itself deductible as 

a claim under section 2053, but only to 

the extent of the amount of interest 

accrued at the date of the decedent’s 

death and actually paid, even if the 

executor elects the alternate valuation 

method under section 2032. (Post-death 

accrued interest may be deductible in 

appropriate circumstances either as an 

estate tax administration expense under 

section 2053 or as an income tax 

deduction.) 

(d) Examples. The following examples 

illustrate the application of paragraphs 

(a) through (c) of this section. Except as 

is otherwise provided in the examples, 

assume that the claimant (C) is not a 

family member, related entity or 

beneficiary of the decedent (D) and is 

not the executor (E). Assume that a 

claim represents a personal obligation of 

D existing at the time of D’s death and 

is enforceable against D’s estate. Assume 

that the payment of the claim, where 

applicable, is made out of property 

subject to claims (as defined in section 

2053(c)(2) and § 20.2053–1(c)(2)) and is 

allowable by the law of the jurisdiction 

under which the decedent’s estate is 

being administered, or is paid prior to 

the filing of the estate tax return 

(including any extension granted under 

section 6081) from property not subject 

to claims. Assume that any court decree 

is based upon the facts upon which 

deductibility depends and is consistent 

with applicable local law. Assume that 

any settlement is reached in bona fide 

negotiations between or among parties 

having adverse interests with respect to 

the claim and that the terms of the 

settlement are not inconsistent with 

applicable local law. 

Example 1. Contested claim, single 

defendant, no decision. D is sued by C for 

$100x in a tort proceeding and responds 

asserting affirmative defenses available to D 

under applicable local law. D dies and E is 

substituted as defendant in the suit. D’s 

estate tax return is due before a judgment is 

reached in the case. D’s gross estate includes 

only property subject to claims and exceeds 

$100x. E may not take a deduction on the 

return for the claim under section 2053(a)(3). 

A deduction may be claimed on the return, 

however, for expenses incurred prior to the 

filing of the estate tax return in defending the 

estate against the claim if the expenses have 

been paid in accordance with § 20.2053–3(c) 

or (d)(3) or as an estimate under § 20.2053–

1(b)(4). E may file a protective claim for 

refund before the expiration of the period of 

limitations for claims for refund of the estate 

tax in order to preserve the estate’s right to 

claim a refund if the amount of the liability 

will not be paid or cannot be ascertained 

with reasonable certainty by the expiration of 

that period of limitations. If payment is 

subsequently made pursuant to a court 

decision or a settlement, a deduction for the 

payment, as well as expenses incurred 

incident to the claim and not previously 

deducted, may be taken and relief may be 

sought by supplementing a previously filed 

protective claim or by filing a claim for 

refund as provided by section 6511. 

Example 2. Contested claim, single 

defendant, final court decree and payment. 

The facts are the same as in Example 1 

except that, before the return is timely filed, 

the court enters a decision in favor of C, no 

timely appeal is filed, and payment is made. 

A deduction is allowed for the amount paid 

in satisfaction of the claim pursuant to the 

final decision of the local court, including 

any interest accrued prior to D’s death, under 

section 2053(a)(3). In addition, a deduction 

may be available under § 20.2053–3(d)(3) for 

expenses incurred prior to the filing of the 


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estate tax return in defending the estate 

against the claim and in processing payment 

of the claim. 

Example 3. Contested claim, single 

defendant, settlement and payment. The 

facts are the same as in Example 1 except 

that, before the return is timely filed, a 

settlement is reached between D’s estate and 

C for $80x and payment is made. A 

deduction is allowed for the amount of the 

settlement paid to C ($80x) under section 

2053(a)(3). In addition, a deduction may be 

available under § 20.2053–3(d)(3) for 

expenses incurred prior to the filing of the 

estate tax return in defending the estate, 

reaching a settlement, and processing 

payment of the claim. 

Example 4. Contested claim, multiple 

defendants. The facts are the same as in 

Example 1 except that the suit filed by C lists 

D and K, an unrelated third-party, as 

defendants. If the claim is not resolved prior 

to the time the estate tax return is filed, E 

may not take a deduction for the claim under 

section 2053(a)(3) on the return. If payment 

is subsequently made of D’s share of the 

claim pursuant to a court decision or a 

settlement holding D liable for 40 percent of 

the amount due and K liable for 60 percent 

of the amount due, then the estate may take 

a deduction for the amount paid in 

satisfaction of the claim representing D’s 

share of the liability as assigned by the court 

decree ($40x), plus any interest on that share 

accrued prior to D’s death, under section 

2053(a)(3). If the court decision finds D and 

K jointly and severally liable for the entire 

$100x and D’s estate pays the entire $100x 

but could have reasonably collected $50x 

from K in reimbursement, the estate may take 

a deduction under section 2053(a)(3) and 

paragraph (b)(3) of this section for only $50x 

and the interest on $50x accrued prior to D’s 

death. In both instances, a deduction may 

also be available under § 20.2053–3(d)(3) for 

expenses incurred and not previously 

deducted in defending the estate against the 

claim and processing payment of the amount 

due from D. 

Example 5. Contested claim, multiple 

defendants, settlement and payment. The 

facts are the same as in Example 1 except that 

the suit filed by C lists D and K, an unrelated 

third-party, as defendants. D’s estate settles 

with C for $10x and payment is made before 

the return is timely filed. E may take a 

deduction for the amount paid to C in 

satisfaction of the claim. In addition, a 

deduction may be available under § 20.2053–

3(d)(3) for expenses incurred prior to the 

filing of the estate tax return in defending the 

estate, reaching a settlement, and processing 

payment of the claim. 

Example 6. Mixed claims. During life, D 

contracts with C to perform specific work on 

D’s home for $75x. Under the contract, 

additional work must be approved in 

advance by D. C performs additional work 

and sues D for $100x for work completed 

including the $75x agreed to in the contract. 

D dies and D’s estate tax return is due before 

a judgment is reached in the case. E contests 

liability for $25x. E may take a deduction on 

the return for $75x if it has been paid or if 

it meets the requirements of an estimated 

amount. In addition, a deduction may be 

claimed on the return for expenses incurred 

in defending the estate against the claim if 

they have been paid under § 20.2053–3(c) or 

(d)(3) or as an estimate under § 20.2053–

1(b)(4). E may file a protective claim for 

refund before the expiration of the period of 

limitations on claims for refund of the estate 

tax in order to preserve the estate’s right to 

claim a refund if payment on any amount in 

excess of $75x is subsequently made in 

resolution of a claim that would qualify for 

a deduction under section 2053. To the 

extent that the expenses incurred in 

defending the estate against the claim are not 

deducted as an estimate, they may be 

included in the protective claim for refund. 

Example 7. Unenforceable claims. D is 

sued by C for $100x in a tort proceeding but 

the claim is barred by the applicable period 

of limitations and there is no other recourse 

available to C. A deduction is not allowed for 

the claim under section 2053(a)(3) whether or 

not the estate actually pays money in 

satisfaction of the claim. A deduction may be 

available, however, under § 20.2053–3(d)(3) 

for expenses incurred in defending the estate 

against the claim. 

Example 8. Non-contingent and recurring 

obligation to pay, binding on estate. D’s 

property settlement agreement incident to D’s 

divorce, signed three years prior to D’s death, 

obligates D or D’s estate to pay to S, D’s 

former spouse, $20x per year for 10 years. 

The payments are not conditioned on 

whether or not S remarries. If S dies prior to 

the last payment, the terms of the agreement 

state that the remaining payments are to be 

made to S’s estate or as S may appoint in S’s 

will. Prior to filing D’s estate tax return, D’s 

estate pays the first of the 7 payments 

remaining as of D’s death. The estate may 

take a deduction for the present value of 

these payments. See §§ 20.7520–1 through 

20.7520–4. 

Example 9. Contingent recurring obligation 

to pay, binding on estate. D’s property 

settlement agreement incident to D’s divorce, 

signed three years prior to D’s death, 

obligates D or D’s estate to pay to S, D’s 

former spouse, $20x per year for 10 years. 

The obligation to make the annual payments 

ceases upon S’s remarriage or S’s death prior 

to the due date of the last payment. Prior to 

filing D’s estate tax return, D’s estate pays the 

first of the 7 payments remaining as of D’s 

death. E may take as a deduction on the 

return the amount of the 1 payment made 

prior to the filing of D’s estate tax return. 

Additional payments become deductible as 

they are paid. E may file a protective claim 

for refund before the expiration of the period 

of limitations for claims for refund of the 

estate tax in order to preserve the estate’s 

right to claim a refund if the amount of the 

liability will not be paid or is not 

ascertainable with reasonable certainty by the 

expiration of the applicable period of 

limitations. If the total amount to be paid in 

satisfaction of the liability is not 

ascertainable with reasonable certainty at the 

time of examination of the return, relief may 

be sought by a claim for refund (either actual 

or protective) as provided by section 6511. 

Example 10. Recurring obligation to pay, 

estate purchases a commercial annuity in 

satisfaction. D’s property settlement 

agreement incident to D’s divorce, signed 

three years prior to D’s death, obligates D or 

D’s estate to pay to S, D’s former spouse, 

$20x per year for 10 years. D’s estate 

purchases a commercial annuity from an 

unrelated dealer in commercial annuities, 

XYZ, in a bona fide sale to satisfy the 

obligation to S. E may deduct the entire 

amount paid to XYZ to obtain the annuity, 

regardless of whether or not the obligation to 

S was contingent. 

(e) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or after the date of publication 

of the Treasury decision adopting these 

rules as final regulations in the Federal 

Register. 

Par. 6. Section 20.2053–6 is amended 

by revising paragraphs (a) and (c) and 

adding new paragraphs (g) and (h) to 

read as follows: 

§ 20.2053–6 Deduction for taxes. 

(a) In general. Taxes are deductible in 

computing a decedent’s gross estate 

only as claims against the estate (except 

to the extent that excise taxes may be 

allowable as administration expenses), 

and only to the extent not disallowed by 

section 2053(c)(1)(B) (see the remaining 

paragraphs of this section). However, 

see §§ 20.2053–9 and 20.2053–10 with 

respect to the deduction allowed for 

certain state and foreign death taxes. 

* * * * * 

(c) Death taxes. (1) For the estates of 

decedents dying on or before December 

31, 2004, no estate, succession, legacy or 

inheritance tax payable by reason of the 

decedent’s death is deductible, except 

as provided in § 20.2053–9 and 

§ 20.2053–10 with respect to certain 

state and foreign death taxes on 

transfers for charitable, etc., uses. 

However, see sections 2011 and 2014 

and these regulations with respect to 

credits for death taxes. 

(2) For the estates of decedents dying 

after December 31, 2004, see section 

2058 to determine the deductibility of 

state death taxes. 

* * * * * 

(g) Post-death adjustments of 

deductible tax liability. Post-death 

adjustments increasing a tax liability 

accrued prior to the decedent’s death, 

including increases of taxes deducted 

under this section, will increase the 

amount of the deduction taken under 

section 2053(a)(3) for that tax liability. 

Similarly, any refund subsequently 

determined to be due to and received by 

the estate with respect to taxes deducted 

by the estate under this section reduces 

the amount of the deduction taken for 

that tax liability under section 

2053(a)(3). Expenses associated with 

defending the estate against the increase 

in tax liability or with obtaining the 


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refund may be deductible under 

§ 20.2053–3(d)(3). A protective claim for 

refund of estate taxes may be filed 

before the expiration of the period of 

limitations for claims for refund in order 

to preserve the estate’s right to claim a 

refund if the amount of a deductible tax 

liability may be affected by such an 

adjustment or refund. The application of 

this section may be illustrated by the 

following examples: 

Example 1. Increase in tax due. After the 

decedent’s death, the Internal Revenue 

Service examines the gift tax return filed by 

the decedent in the year before the 

decedent’s death and asserts a deficiency of 

$100x. The estate spends $30x in a nonfrivolous defense against the increased 

deficiency. The final determination of the 

deficiency, in the amount of $90x, is paid by 

the estate. The estate may deduct $90× under 

section 2053(a)(3) and $30x under § 20.2053–

3(c)(2) or (d)(3). 

Example 2. Refund of taxes paid. 

Decedent’s estate timely files D’s individual 

income tax return for the year in which the 

decedent died. The estate timely pays the 

entire amount of the tax due, $50x, as shown 

on that return. The entire $50x was 

attributable to income received prior to the 

decedent’s death. Decedent’s estate 

subsequently discovers an error on the 

income tax return and files a timely claim for 

refund. Decedent’s estate receives a refund of 

$10x. The estate is only allowed a deduction 

of $40x under section 2053(a)(3) for the 

income tax liability accrued prior to the 

decedent’s death. If a deduction for $50x was 

allowed on the estate tax return prior to the 

receipt of the refund, it shall be the duty of 

the executor to notify the Commissioner of 

the change and to pay the resulting tax, with 

interest. 

(h) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or after the date of publication 

of the Treasury decision adopting these 

rules as final regulations in the Federal 

Register. 

Par. 7. Section 20.2053–9 is amended 

as follows: 

1. Revising the heading for paragraph 

(a) and adding a sentence at the end of 

paragraph (a). 

2. Revising the first and last sentences 

of paragraph (c). 

3. Adding new paragraph (f). 

The revisions and addition read as 

follows: 

§ 20.2053–9 Deduction for certain state 

death taxes. 

(a) General rules for the estates of 

decedents dying on or before December 

31, 2004.* * * For the estates of 

decedents dying after December 31, 

2004, see section 2058 to determine the 

deductibility of state death taxes. 

* * * * * 

(c) Exercise of election. The election 

to take a deduction for a state death tax 

imposed upon a transfer for charitable, 

etc., uses shall be exercised by the 

executor by the filing of a written 

notification to that effect with the 

Commissioner. * * * The election may 

be revoked by the executor by the filing 

of a written notification to that effect 

with the Commissioner at any time 

before the expiration of such period. 

* * * * * 

(f) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or before December 31, 2004. 

Par. 8. Section 20.2053–10 is 

amended by revising paragraph (c) and 

adding a new paragraph (e) to read as 

follows: 

§ 20.2053–10 Deduction for certain foreign 

death taxes. 

* * * * * 

(c) Exercise of election. The election 

to take a deduction for a foreign death 

tax imposed upon a transfer for 

charitable, etc., uses shall be exercised 

by the executor by the filing of a written 

notification to that effect with the 

Commissioner. An election to take the 

deduction for foreign death taxes is 

deemed to be a waiver of the right to 

claim a credit under a treaty with any 

foreign country for any tax or portion 

thereof claimed as a deduction under 

this section. The notification shall be 

filed before the expiration of the period 

of limitations for assessment provided 

in section 6501 (usually 3 years from the 

last day for filing the return). The 

election may be revoked by the executor 

by the filing of a written notification to 

that effect with the Commissioner at any 

time before the expiration of such 

period. 

* * * * * 

(e) Effective date. The rules of this 

section apply to the estates of decedents 

dying on or after the date of publication 

of the Treasury decision adopting these 

rules as final regulations in the Federal 

Register. 

Kevin M. Brown, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. E7–7601 Filed 4–20–07; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[CGD13–07–009] 

RIN 1625–AA00 

Safety Zones: Fireworks Displays in 

the Captain of the Port Portland Zone 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard is proposing 

to amend its regulations to establish 

additional safety zones on the waters of 

the Columbia River located in the Area 

of Responsibility (AOR) of the Captain 

of the Port, Portland, Oregon during 

annual fireworks displays. The Captain 

of the Port, Portland Oregon is taking 

this action to safeguard watercraft and 

their occupants from safety hazards 

associated with these displays. Entry 

into these zones is prohibited unless 

authorized by the Captain of the Port. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

May 23, 2007. 

ADDRESSES: You may mail comments 

and related material to Petty Officer 

Michelle Duty at Sector Portland 6767 

N. Basin Ave., Portland, OR 97217. 

Sector Portland maintains the public 

docket for this rulemaking. Comments 

and material received from the public, 

as well as documents indicated in this 

preamble as being available in the 

docket, will become part of this docket 

and will be available for inspection or 

copying at Sector Portland between 8 

a.m. and 4 p.m., Monday through 

Friday, except Federal holidays. 

FOR FURTHER INFORMATION CONTACT: 

Petty Officer Michelle Duty, c/o Captain 

of the Port, Portland 6767 N. Basin 

Avenue, Portland, Oregon 97217, 503–

240–2590. 

SUPPLEMENTARY INFORMATION: 

Request for Comments 

We encourage you to participate in 

this rulemaking by submitting 

comments and related material. If you 

do so, please include your name and 

address, identify the docket number for 

this rulemaking (CGD13–07–009), 

indicate the specific section of this 

document to which each comment 

applies, and give the reason for each 

comment. Please submit all comments 

and related material in an unbound 

format, no larger than 81⁄2 by 11 inches, 

suitable for copying. If you would like 

to know they reached us, please enclose 

a stamped, self-addressed postcard or 


pwalker on PROD1PC71 with PROPOSALS